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Month: July 2019

Healthcare Twitter has been focused this past week on the closure of the Hahnemann University Hospital (HUH) trying to rationalize the root causes of such a large system failure. (although perhaps it’s more appropriate that medical Twitter is focused on this subject, as the economists have been surprisingly silent).

Dr. Gaffney in particular wrote a piece in The Nation arguing along predictable ideological lines that the source of the problem is the for-profit organization of the healthcare system and that reorginizing the system around non-profit providers funded by a centralized Medicare-for-All single payer plan would prevent such closures. Notably, and crucially, missing from his analysis is that the the HUH came under for-profit private management as part of a restructuring of Allegheny Health Education and Research Foundation (AHERF), a large NON-PROFIT healthcare system in Pennsylvania that went bankrupt. This is not an unusual occurence. The non-profit St. Vincent’s Catholic Medical Center in New York was the main hospital for the downtown Manhattan community. This was the main hospital where 9/11 first responders were brought to. As a personal note this was also the hospital where my stepfather died. In 2005 St. Vincent’s declared bankruptcy and went through reorganization, but in 2010 declared bankruptcy again, shut down the hospital and sold off its various properties and outpatient facilities to other healthcare systems. The site sat fallow for a few years until the hospital building was demolished and an apartment building was built there. I think part of the building is also some kind of religious center now. The experience of AHERF and St. Vincent’s shows that being a non-profit is not a silver bullet solution to preventing such hospital closures. The St. Vincent’s case is also notable because unlike HUH, which was a safety-net hospital in a poor community, St. Vincent’s serviced downtown Manhattan, the district with the highest per capita income in the country. If a non-profit in a high income community couldn’t make it, who would? This doesn’t appear like something that can be solved simply by a single payer, something else is going on.

Dr. Gaffney’s critique of running a a safety-net hospital as a for-profit business has a logic to it, but as I have argued above simply eliminating the for-profit nature of the hospital does not eliminate the hospital closures we’re trying to prevent. To counter the Jacobin argument, I propose instead a Jacobite critique of capitalism. The fundamental problem with capitalism is not that it encourages profit-seeking, which is inherent to human nature, but that it separates the conduct of business from the social responsibility of the aristocracy (later bourgeoisie) to the local community that existed under feudalism and monarchism. While it’s important not to over-romanticize this noblesse oblige, it is nonetheless necessary to emphasize that social organization in pre-capitalist societies was dependent on responsibilities of the aristocracy and peasantry to each other and that these responsibilities were enshrined in the law of the time. The fundamental problem that Marx was highlighting in his critique of capitalism was the erosion of the aristocracy’s legal obligations to the peasantry as they simulatenously accumulated capital through new technologies and legal “reform”.

The primary mechanism for this deterioration of noblesse oblige is the accumulation of capital to the point where the capital becomes effectively international. As capital accumulates it reaches a point where investment in other communities becomes not only desirable, but even necessary. As the business expands outside of the community that gave birth to it, the original community becomes increasingly less critical to the operation of the business and therefore vulnerable to outsourcing as the capital is shifted between communities as part of various arbitrage opportunities. Just as capitalism causes the worker to be alienated from their labor, the aristocrat is alienated from their noblesse oblige by accumulating capital. This can be seen distinctly in the case of HUH. The non-profit AHERF that operated HUH until 1998 was a Pennsylvania-wide system based in Pittsburgh, not Philadephia. Tenet Healthcare acquired HUH from AHERF and is based in Texas. Paladin Healthcare acquired HUH from Tenet and is based in California. None of these organizations had a responsibility to Philadelphia as part of their organizational mission. Not even AHERF, which did not need HUH to continue existing as the rebranded Allegheny Health Network. Naturally HUH kept getting undermined by decisions made somewhere far away, usually in conflict with the interests of HUH’s Philadelphia patients. This failure of noblesse obligate to the community is also highlighted in the situation that HUH’s residents have been put in by the closure, left to frantically look for new facilities to host them. The situation in St. Vincent’s is related to this systemic degeneration of the aristocracy in a subtle way. Although St. Vincent’s had various outpatient clinics in other boroughs, it was inherently a local institution that only served the New York City community. But not its staff. Even though St. Vincent’s mission was focused on serving the community, that’s not necessarily true of its personnel. This is especially true for physicians who will often be uprooted from their own community to go somewhere else to university, then somewhere else to medical school, somewhere else again for residency, and somewhere else yet again to practice. As a less extreme example, my understanding is Dr. Gaffney was from New York, but practices in Boston. Although physicians are a functional aristocracy through their privilege and wealth, can we expect aristocratic loyalty from such ronins? 60% of a hospital’s expenses are labor costs, and even after its bankruptcy reorganization St. Vincent’s was not able to reduce its payroll. The hospital could have been saved if staff had reduced their salaries, but why should they if they have no loyalty to the community? St. Vincent’s closed and the staff dispersed to high paying jobs at the many other NYC hospitals (who are also slowly going into bankruptcy as they accumulate debt to pay competitive wages). Similarly, HUH staff could have saved HUH by taking paycuts. I wouldn’t expect them to take paycuts to generate profits for a private equity firm, but the point remains that they could have done it. These physicians will also find highly lucrative jobs in other hospitals.

A basic critique of for-profit schemes (or even non-profits behaving as for-profits) is insufficient to resolve the problem of hospital closures. The root cause of the issue is a much bigger society-wide problem where the public in general, and the functional aristocracy especially, are increasingly alienated from their local community and the responsibilities that bind community members together. Single payer insurance could make the situation even worse as the financing of healthcare is further removed from the local community to Washington DC. In addition, the St. Vincent example provides a haunting demonstration that having a community oriented organization may be insufficient to provide stability if clinicians are not themselves committed to that mission and are allowed to exploit the resources of the community and then leave once the system collapses. Hospital stability cannot be ensured until there is a more thorough social reevaluation of the fundamental responsibilities of the bourgeois aristocracy to the local communities that function as the source of their status and wealth.